Directors on corporate boards are – almost by definition – men and women who are accomplished and successful. So it is only natural that most board members also are highly self-assured and confident in their judgment and abilities.
When that self-confidence is misplaced or overstated, however, the consequences can be costly. This is particularly true when overconfidence causes board members to underestimate or overlook the risks associated with fraud or management incompetence. Moreover, when board overconfidence is compounded by management overconfidence, the risks can multiply quickly.
Once the dangers of overconfidence are understood and appreciated, board and management teams alike can begin taking proactive steps to mitigate the risks. Knowing the warning signs of board overconfidence is an essential first step.